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Medicare Beneficiary Out-of-Pocket Costs: Are Medicare Advantage Plans a Better Deal?


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The creators of the Medicare Advantage (MA) program envisioned that seniors would opt out of fee-for-service Medicare to take advantage of the lower premiums, lower cost-sharing, and additional benefits available in private plans. Earlier research, however, indicates that out-of-pocket costs for MA enrollees vary widely by health status and plan benefit package. This issue brief examines out-of-pocket costs for beneficiaries in good, fair, and poor health throughout the country. In 2005, annual out-of-pocket costs for plan members ranged from under $100 for beneficiaries in good health to over $6,000 for those in poor health. Costs for beneficiaries in poor health would actually have been higher than fee-for-service in 19 of the 88 MA plans examined. Despite the high payments, relative to fee-for-service costs, that MA plans receive from Medicare to enrich enrollee benefits, these plans may not always be a good deal for sicker beneficiaries who use more health services.


Publication Details

Publication Date: May 1, 2006

B. Biles, L. Hersch Nicholas, and S. Guterman, Medicare Beneficiary Out-of-Pocket Costs: Are Medicare Advantage Plans a Better Deal?, The Commonwealth Fund, May 2006



Professor, Department of Health Policy, George Washington University School of Public Health and Health Services
Lauren Hersch Nicholas
Assistant Professor, Department of Health Policy and Management and of Surgery, Johns Hopkins Bloomberg School of Public Health and School of Medicine
Independent Consultant